Issue

Economic activity in our region is below the desired pace, and this slowed economic activity is having a noticeable local impact. Residents of Southeastern Alberta are earning some of the lowest average wages in the Province [1] which, with the current economy and interest rates, leads quickly to a standard of living below that of our neighbors. Efforts to attract new industry and expand existing businesses are met with strong competition in neighboring regions, provinces, states, and globally; many of whom are implementing business incentive programs to promote their regions.

Executive Summary

Many municipalities have begun to focus on business incentive programs to incentivize businesses to relocate or expand in their region. These programs consider and aim to address the fact that when businesses make expansion or relocation decisions, factors such as costs (land, utilities, taxes), availability of labour, and transportation are often considered. In order for Southeastern Alberta to remain competitive and sustain future economic growth, the Medicine Hat & District Chamber of Commerce is requesting the City of Medicine Hat, Town of Redcliff, and Cypress County each develop an Investment Readiness Community Action Plan designed to attract new employers and expand existing industries in our region.

Background

As our region works to re-establish the economic footing we have lost in the past few years, we are faced with stiff global competition amongst regions and municipalities looking to attract and retain major industry and skilled labour. Businesses looking to expand or relocate are now offered a variety of different incentives and options to encourage establishment in particular regions, challenging municipalities to maintain their growth rates and standards of living for those calling the area home.

Historically, Medicine Hat was able to attract and retain major industry along with skilled labour to our region with the availability of natural gas, abundant land and water, and low utility rates. However, in more recent years the City of Medicine Hat has noticed stagnated population growth, experiencing only a moderate growth of approximately 1.83% growth in the last five years with only 0.85% growth year-over-year.[2] In addition, our region has faced challenges, specifically in the oil and gas sector, with several major employers deciding to relocate or reduce their operations because of low commodity prices, decreased oil and gas production and challenges with access to markets. These economic challenges have driven home the need to diversify our local economy in order to insulate our local economy from the boom and bust cycles that have historically characterized the economy of Alberta.

While various local groups have been active in business recruitment attempts, competitive incentive plans in other regions add to the difficulty of achieving this goal. A recent report on the factors that companies base site selection plans and priorities for locating a new facility include, in order of importance, labour cost, quality-of-life, availability of skilled labour, energy availability, construction costs, ICT/broadband, corporate tax rate, energy cost, environmental regulation, and available land.[3] 

Historic investments by large companies as a result of incentives offered through offsite levy fees and energy rates show that there is a very favourable response from developers when incentives are offered, indicating that governments can, and do, have a very real role to play in providing the appropriate environment to spur economic development.

Analysis 

To enjoy stable economic growth in the future, making it possible for residents to maintain or improve their standard of living, an effort must be made to diversify our industry base, attract those employers who offer skilled labour or professional positions, and develop or find individuals willing and able to fill these positions.

Identifying incentives that are appealing to both new and existing businesses and beneficial to tax-payers is an important step towards developing a healthy and diverse economic base in our region and a step towards creating a growing economic environment in which business can prosper. In turn, residents benefit through well-paid employment opportunities and increased tax revenue.

A key driver of a consistently high standard of living is an economy diverse enough to weather weakness in one sector by enjoying strength in others. While our region has historically relied primarily on the oil and gas and agricultural industries, the time has come to diversify our economy. This is especially important considering the cyclicality of these specific sectors.

To be competitive in efforts to attract and expand industries, regions must consider the factors affecting these major decisions made by businesses. Feedback from existing and potential businesses to our area has frequently focused on availability of labour, appropriate land, development processes and start-up costs.  

However, as a community, we must have a clear understanding of what type of investment we are looking for and what investments are a fit for our community. Additionally, investment will more likely come to a community that is prepared and has the right tools and information readily available, regardless of the level of site selector, type of investment or their process.

Of particular interest are the prominent categories that are highlighted within location selection processes including[4]:

• Market characteristics (local and regional)
• Costs (labour, taxes, transportation and other)
• Taxes (corporate taxes, property taxes, etc.)
• Labour (costs, availability, quality, etc.)
• Natural resources (availability and quality of raw materials)
• Land availability (cost, size, site readiness, etc.)
• Climate (weather, floods, earthquakes, seismic activity, etc.)
• Infrastructure (electric rates, telecommunication, etc.)
• Policy structure (incentives)
• Quality of life
• Business support and promotion

In the Strategic Plan 2023-2026 City Council outlined its priorities, vision, and goals for Medicine Hat in the coming years. Economic Evolution was identified as the second goal, with the explanation being, “We will have a strong, diversified regional economy and an economic ecosystem that encourages entrepreneurship”.[5]  

Recommendations 

To achieve our goal of a healthy, prosperous, and diversified economy, the Medicine Hat & District Chamber of Commerce recommends the City of Medicine Hat, Town of Redcliff, and Cypress County:

1. Create an Investment Readiness Team and ensure that personnel are adequately trained to act as the primary point of contact for businesses inquiring or moving through the process of investing in the region.

2. In consultation with key stakeholders, create and implement investment readiness tools and techniques, including establishing a community profile, developing an investment strategy, action plans, and an effective marketing plan, along with determining what metrics will be used to measure success.

3. Review and revise the business incentives in consultation with key stakeholders, industry and business associations in consideration of new and existing businesses, and with eligibility requirements that may include:

• the type of industry the region is trying to attract,
• the type of employment positions created (skilled, semi-skilled),
• the number of full-time equivalent positions that will be created,
• minimum investments for plant, land, and/or leasehold improvements,
• financial backing to complete the project in question,
• review of the business plan, etc.

4. Recommended incentives may include:

1. Property Tax Rebates – Council to consider the return on investment of the long-term property tax revenue in determining the amount of the incentive.
2. Discounted Utilities – Based upon the long-term economic impact of larger developments, employers, or businesses.
3. Transportation Commitments – Transportation for employers with large workforces (i.e. dedicated bus routes).
4. Land Cost Abatements – Partial rebates on land purchases based on meeting minimum construction and long-term job commitments.
5. Workforce Development – Work with industry partners and stakeholders to support HR recruitment and development of skilled and semi-skilled workers through the development of a workforce support package along with options for sponsored recruitment trips, hiring events, and supported skills training at local education institutions.

5. Create and implement a marketing and outreach strategy to promote our community and quality of life, using incentives to entice businesses to choose our region.

6. Streamline complex applications, both through internal (such as TCC) and external (such as grant applications) processes, to ensure that personnel have the proper training and authority to review, provide recommendations, and approve applications in a timely and efficient manner.

7. When reviewing plans and applications from businesses, include flexibility to allow for consideration of unique circumstances that contribute to an economic benefit.

8. Develop working relationships with community organizations, institutions, and key stakeholders in the region to establish an Investment Readiness Community Action Plan which would include provision of business and community supports, resources, training, and employee recruitment strategies.

9. Implement timelines and hold periodic reviews of incentive recipients to ensure agreed upon criteria are being met, therefore providing incentives on a ‘perform or forfeit’ basis.

10. Reporting back to the community on the success of incentives by highlighting key metrics including but not limited to: 

• Number of active client files considering both expansion and/or new investment,
• Yearly inquiries, applications, and completed investments,
• Conversion rates between inquiries and investments,
• Timeline from initial inquiry to investment realization,
• Jobs created,
• Capital investment,
• Land developed,
• Tax revenue.

Resources

Saskatoon Region Economic Development Business Incentive Policies
http://sreda.com/isl/uploads/2016/03/BU-Incentives-16-002-Brochure_electronicversion.pdf
Louisiana Economic Development, Incentives
http://www.opportunitylouisiana.com/index/incentives 
[1] Economic Regional Dashboard: https://regionaldashboard.alberta.ca/region/medicine-hat/population/#/?from=2018&to=2022
[2] Area Development, 33rd Annual Corporate Survey & the 15th Annual Consultants Survey https://www.areadevelopment.com/Corporate-Consultants-Survey-Results/Q1-2023/37th-annual-corporate-survey-decison-makers-feel-economic-pressures.shtml
[3] Economic Developers of Alberta, Investment Readiness Toolkit, http://www.edaalberta.ca/Resources/Documents/Alberta%20Investment%20Readiness%20Toolkit%20FINAL%20December%2031%202012.pdf
[4] City of Medicine Hat, Medicine Hat City Council Strategic Plan 2019-2022: https://www.medicinehat.ca/home/showdocument?id=14548